The MCI Takeover Battle Verizon versus Qwest
1. What are the strengths and weaknesses of Verizon, MCI, and Qwest? Where are the synergies in the proposed combination? 2. Evaluate the two offers in Exhibit 7. What explains the two structures? In each case what is the value to MCI shareholders? 3. Merger arbitrage (or risk arbitrage) finds speculate on the completion of stock and cash mergers, typically buying the target and hedging the risk of the acquirer’s shares according to the exchange ratio in stock mergers. What positions would risk arbs take in this deal? How would their positions change if the Board appeared to favour the Qwest offer? 4. Consider the WorldCom-MCI merger and the Qwest-US West merger? Trying to avoid hindsight bias, should the boards of MCI and US West have accepted these offers? What is the obligation to shareholders? Was that obligation fulfilled? What about WorldCom and Qwest? Did their shareholders benefit? 5. What offer should MCI accept?
6. What approach should Verizon take to win the takeover contest? Qwest? Humana Inc – Managing in a Changing Industry
1. Do you think Humana’s problems were serious enough to warrant some form of restructuring? 2. How much extra value would be created by separating the hospital and the health plan segments through a spinoff? What are the sources of this additional value, and how should the spinoff be structured for Humana to realize maximum benefits from the spinoff? 3. Kaiser Permanente has employed an integrated strategy of owning both hospitals and health plans for many years, some would argue with great apparent success. This suggests that Humana’s problems are not the fault of its integrated strategy per se, and that breaking apart the hospital and the health plan segments may not enhance shareholder value in the long run. Do you agree or disagree? 4. Do any of the other options considered by management represent a more sensible solution to Humana’s problems than...
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